Jersey City Updates Tax Abatement Policy and Procedures

by Kara A. Kaczynski on September 22, 2015

Jersey City Mayor Stephen Fulop recently announced several key changes to the municipality’s tax abatement policy. The changes are part of Jersey City’s new comprehensive housing policy and are intended to ensure that all areas of the city benefit from the area’s rapid growth and development.

In 2013, Mayor Fulop overhauled Jersey City’s policies and procedures governing Payment in Lieu of Taxes (PILOT). Most notably, the revamped PILOT program included a tiered-system under which the length of the tax abatement is largely determined by the location of the project. The goal was to spur development in less-coveted areas of Jersey City.

 Jersey City Updates Tax Abatement Policy and Procedures

The latest directive, which is set forth in Executive Order 2015-007, retains the tiered structure and outlines additional measures intended to foster transparency, objectivity, uniformity, predictability and strategic incentives in the tax abatement process. Most notably, the revised tax abatement revolves around a new tier map that is not constrained by geographic location but also includes updated income data. The expanded Tier 4 includes areas of the city deemed most in need of development and continues to allow for the longest tax exemption.

Jersey City’s new tax abatement policy also includes new affordable housing requirements, which is tied to the length of the abatement. For instance, Tier 1 provides a tax-abatement term of 10 years and requires set aside 10 percent of the total number of units for moderate-income housing. Developers in other tiers can further extend their tax-abatement terms by committing to construct additional affordable units.

The new PILOT Program also slightly increases the annual service charges for developers. For example, the annual service charge under Tiers 2, 3, and 4 is now 11 percent of gross annual revenues.

Additionally, the new policy seeks to standardize enforcement procedures, mechanisms and penalties. Rather than addressing defaults on a project-by-project basis, any entity found to be in default of an obligation in a financial agreement (i.e. failing to pay fees associated with the project and financial agreement, failing to adhere to the construction schedule, and failing to timely submit required documents) will be required to cure the default within 30 days after receiving a notice of the default. The penalties for failing to cure a default include reimbursement of the city’s legal fees and costs, tax liens, increased annual service charges, and termination of the tax exemption.

The revised policies and procedures apply to future long term PILOTs and related financial agreements. Developers are encouraged to review the new policies and procedures and contact experienced counsel with any questions or concerns.

For more information about Jersey City’s new tax abatement policy or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group

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